14 Jan 2014 AMC- Market staged sharp rebound after massive drop on Monday as WFC and JPM reported normal earnings

14 Jan 2014 AMC- Market staged sharp rebound after massive drop on Monday as WFC and JPM reported normal earnings

Market Summary 

European Markets Closing Prices

European markets are now closed; stock markets across Europe performed as follows:

·         UK's FTSE: + 0.1%

·         Germany's DAX: + 0.3%

·         France's CAC: + 0.3%

·         Spain's IBEX: + 0.2%

·         Portugal's PSI: -1.1%

·         Italy's MIB Index: + 0.2%

·         Irish Ovrl Index: -0.1%

·         Greece ATHEX Composite: -2.0%

Before Market Opens

S&P futures vs fair value: +5.70. Nasdaq futures vs fair value: +13.00.
The S&P 500 futures trade six points above fair value.

Markets across Asia ended mostly lower following yesterday's slide on Wall Street. Economic data was limited as Japan's current account deficit widened to JPY593 billion from JPY128 billion (JPY380 billion expected) while the adjusted current account deficit narrowed to JPY50 billion from JPY60 billion (JPY20 billion consensus). Separately, the Economy Watchers Current Index rose to 55.7 from 53.5 (54.2 expected). Elsewhere, South Korea's trade surplus narrowed to $3.65 billion from $3.70 billion and New Zealand's Electronic Card Retail Sales rose 0.6% month-over-month (0.6% last) while the year-over-year reading rose 5.5% (6.7% prior). 

·         Japan's Nikkei fell 3.1% as traders returned to work to find the yen had strengthened to 103.00 against the dollar. Heavyweight Fast Retailing slid 5.0% and Toyota Motor gave up 2.3%. 

·         Hong Kong's Hang Seng shed 0.4%, narrowly avoiding its lowest close in two months. Financial lagged as Industrial & Commercial Bank of China and China Construction Bank fell 0.4% and 0.5%, respectively. 

·         China's Shanghai Composite gained 0.9%, receiving a boost after upbeat GDP forecasts from several tier 1 analysts. Great Wall Motor climbed 5.1% after a Xinhua report indicated the military is looking to buy domestic cars for its fleet. 

Major European indices have spent the first half of the session in a steady climb off their opening lows. Economic data was plentiful. Eurozone Industrial Production rose 1.8% month-over-month (1.4% forecast, -0.8% last) while the year-over-year reading climbed 3.0% (1.4% expected, 0.5% prior). Germany's WPI ticked up 0.4% month-over-month (0.1% forecast, -0.2% previous). Great Britain's CPI increased 0.4% month-over-month (0.5% expected, 0.1% prior) while the year-over-year reading rose 2.0% (2.1% forecast, 2.1% last). Separately, core CPI rose 1.7% year-over-year (1.8% forecast, 1.8% last) and input PPI ticked up 0.1% month-over-month (-0.2% expected, -0.7% prior). Also of note, the House Price Index jumped 5.4% year-over-year (5.9% consensus, 5.5% last). French CPI rose 0.4% month-over-month, as expected (0.0% last) while the current account deficit narrowed to EUR1.90 billion from EUR2.00 billion (EUR2.30 billion expected). Elsewhere, Italy's CPI ticked up 0.2% month-over-month (0.2% prior) while the year-over-year reading rose 0.7% (0.7% last). Both figures met expectations. 

·         Great Britain's FTSE is flat. British Sky Broadcasting outperforms with a gain of 3.9% after confirming it bought back shares. 

·         France's CAC is lower by 0.2% as growth-sensitive names lag. Technip, Vallourec, and Vinci are all down between 1.5% and 1.7%. GDF Suez outperforms with a modest gain of 0.3%. 

·         In Germany, the DAX trades down 0.3% with financials contributing to the weakness. Commerzbank and Deutsche Boerse are lower by 1.1% and 0.7%, respectively.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 70 (+1.69%) at 4183, the S&P 500 closed up 20 (+1.08%) at 1839, and the Dow closed up 116 (+0.71%) at 16374. Action came on mixed volume (NYSE 636 mln vs. avg. of 680; NASDAQ 1895 mln vs. avg. of 1739), with advancers outpacing decliners (NYSE 2173/918, NASDAQ 1969/652) and new highs outpacing new lows (NYSE 110/19, NASDAQ 154/16).

Relative Strength: 
Biotechnology-IBB +3.63%, Clean Energy-PBW +3.23%, Social Media-SOCL +2.77%, Poland-EPOL +2.73%, Semiconductors-SMH +2.67%, Egypt-EGPT +2.62%, Israel-EIS +2.54%, Thailand-THD +2.19%, Oil and Gas Exploration-XOP +1.95%, Vietnam-VNM +1.82%.

Relative Weakness: 
Volatility-VXX -3.99%, Gold Miners-GDX -2.43%, Silver Miners-SIL -1.36%, Australia-EWA -1.32%, Japanese Yen-FXY -1.23%, Columbia Index-GXG -1.2%, Australian Dollar-FXA -1.16%, Platinum-PPLT -0.99%, Canadian Dollar-FXC -0.95%, Sugar-SGG -0.88%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Tech Shares Lead Stocks Higher
Equity indices followed Monday's broad-based sell-off with a daylong rebound. The S&P 500 gained 1.1% while the Nasdaq (+1.7%) outperformed, turning positive for the year.

After playing a significant part in Monday's weakness, retailers participated in today's rebound as the SPDR S&P Retail ETF (XRT 84.31, +0.95) gained 1.1%. The industry group likely received a slight bump from the December retail sales report, which came in ahead of estimates. However, gauging the true impact of the report was a bit of a challenge considering the November reading was revised lower.

Although most retailers took part in the rebound, GameStop (GME 36.28, -9.04) was not as fortunate. The stock plunged 20.0% after issuing disappointing guidance.

Elsewhere among cyclical groups, the financial sector (+0.8%) was unable to catch up to the broader market as JPMorgan Chase (JPM 57.74, +0.04) and Wells Fargo (WFC 45.59, +0.03) weighed. The pair ended little changed after both reported modest bottom-line beats. Notably, both banks saw large declines in mortgage originations.

Even though all ten sectors ended higher, materials (+1.4%) and technology (+1.9%) were the only outperformers among growth-sensitive groups. The tech sector rallied thanks to all-around support from its components. Top-weighted members like Apple (AAPL 546.39, +10.66), Google (GOOG 1149.40, +26.42), Microsoft (MSFT 35.78, +0.80), and Oracle (ORCL 38.21, +0.46) added between 1.2% and 2.4% while chipmakers displayed strength as well. The PHLX Semiconductor Index surged 2.3% after Intel (INTC 26.51, +1.01) was upgraded to ‘Overweight' from ‘Neutral' at JPMorgan.

The big gains among tech shares contributed to the outperformance of the Nasdaq, which also drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 244.05, +8.54) surged 3.6%. In turn, this underpinned the health care sector (+1.3%), which ended ahead of other defensive groups. The remaining countercyclical sectors—consumer staples (+0.6%), telecom services (+0.4%), and utilities (+0.1%)—lagged.

Treasuries were trapped in a steady downtrend, sending the 10-yr yield higher by four basis points to 2.87%.

Participation was on the light side with only 636 million shares traded at the NYSE.

We would also note that Philadelphia Fed President Plosser and Dallas Fed President Fisher both gave speeches today in which they left an impression that they remain in favor of continued tapering efforts. Both men are FOMC voters this year and both are known for their hawkish stances with respect to the Fed's asset purchase program.

The recognition that the market held up well in the wake of their remarks underscores that a similar view insinuated by Atlanta Fed President Lockhart (who doesn't have an FOMC vote in 2014) on Monday served as a convenient headline excuse to take some profits and was not the primary cause of the weakness.

Today's economic data was limited to a pair of reports. 

• Retail sales increased 0.2% in December after rising a downwardly revised 0.4% (from 0.7%) in November. The Briefing.com consensus expected no change in the December reading. Given the weak jobs report and the corresponding decline in aggregate wages, there was real potential for a dismal retail sales report. Our analysis of debt trends suggested that consumers could increase their debt load without feeling much pain, but the psychological effect of maintaining high savings was outweighing low debt ratios. It seems that the mental hold on spending may be ending. 
• Business inventories increased 0.4% in November, down from an upwardly revised 0.8% (from 0.7%) in October. The Briefing.com consensus expected business inventories to increase 0.3%. Total inventories consist of manufacturers, merchant wholesalers, and retailers. Both manufacturers (0.0%) and merchant wholesaler (0.5%) inventories were announced prior to the total inventory release. The only unknown was retailer inventories, which increased 0.8% in November after increasing 1.1% in October. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while December PPI and the January Empire Manufacturing survey will both be reported at 8:30 ET. The day's data will be topped off with the 14:00 ET release of the Federal Reserve's Beige Book for January. 

• Nasdaq +0.2% YTD 
• Russell 2000 0.0% YTD 
• S&P 500 -0.5% YTD 
• DJIA -1.2% YTD

Commodities

Closing Commodities: Natural Gas Futures Extend Weather-Driven Gains

• Feb gold fell for the first time in four sessions as the dollar index chopped around slightly above the unchanged line. The yellow metal rose to a session high of $1254.90 per ounce in morning floor trade but reversed into negative territory. It brushed a session low of $1241.10 per ounce and eventually settled with a 0.5% loss at $1245.20 per ounce
• Mar silver popped to a session high of $20.67 per ounce in morning pit action but lost momentum and fell as low as $20.13 per ounce. It managed to erase some of the loss and settled 0.4% lower at $20.28 per ounce
• Feb crude oil traded higher today despite the slightly stronger dollar index. Prices gained support on better-than-anticipated retail sales data. Retail sales increased 0.2% in December after rising a downwardly revised 0.4% (from 0.7%) in November, while the Briefing.com consensus expected no change in the reading. The energy component climbed to a session high of $92.88 per barrel and settled at $92.52 per barrel, or 0.8% higher
• Feb natural gas extended gains for a third consecutive session, trading in the $4.30-$4.38 per MMBtu range. It settled at $4.37 per MMBtu, booking a gain of 2.3%

COMEX Metals Closing Prices

  Feb gold fell $5.90 to $1245.20/oz 

·         Gold fell for the first time in four sessions as the dollar index chopped around slightly above the unchanged line. The yellow metal rose to a session high of $1254.90 in morning floor trade but reversed into negative territory. It brushed a session low of $1241.10 and eventually settled with a 0.5% loss. 

  Mar silver fell $0.09 to $20.28/oz 

·         Silver popped to a session high of $20.67 in morning pit action but lost momentum and fell as low as $20.13. It managed to erase some of the loss and settled 0.4% lower. 

  Mar copper fell 1 cent to $3.34/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn fell 2 cents to $4.32/bushel 

·         Mar wheat rose 7 cents to $5.80/bushel 

·         Mar soybeans rose 11 cents to $13.06/bushel 

·         Feb ethanol fell 3 cents to $1.92/gallon 

·         Mar sugar (#16 (U.S.)) rose 0.01 of a penny to 20.26 cents/lbs

NYMEX Energy Closing Prices

  Feb crude oil rose $0.74 to $92.52/barrel 

• Crude oil traded higher today despite a slightly stronger dollar index. The energy component climbed to a session high of $92.88 and settled with a 0.8% gain.

  Feb natural gas rose 10 cents to $4.37/MMBtu 

• Natural gas extended gains for a third consecutive session, trading in the $4.30-$4.38 range. It settled just below its session high, booking a gain of 2.3%. 

  Feb heating oil settled unchanged at $2.93/gallon 

  Feb RBOB fell 1 cent to $2.62/gallon

Treasuries

Treasuries Close on Lows: 10-yr: -08/32..2.870%..USD/JPY: 104.15..EUR/USD: 1.3681

• Treasuries closed on the lows as steady selling persisted throughout the session, halting the complex's three-day winning streak. Click here to see an intraday yields chart.
• Aiding the decline was the better than expected retail sales report (0.2% actual v 0.0% expected) and commentary from two Fed officials (Fisher and Plosser) suggesting the central bank could continue to scale back its QE program into 2014. 
• Today's 1M bill auction was well received, drawing 0.000% and a 6.36x bid/cover, the strongest since late-2011. 
• Selling weighed heaviest on maturities in the belly, causing the 5y to tack on +5.8bps to finish @ 1.647%. 
• The 10y tested the 50 dma (2.826%) in overnight trade, and ticked higher throughout the day as support in the area held strong. 
• At the long end, the 30y added +3.3bps to close at 3.800%. The uptick in yield ran the 30y back above its 100 dma (3.792%). 
• A steeper yield curve took hold as the 2-10-yr spread widened to 248.5bps. 
• Precious metals went off on their lows with gold -$9 @ $1242 and silver -$0.21 @ $20.17. 
• Data: MBA Mortgage Index (7), PPI, Empire Manufacturing (8:30), and the Fed's Beige Book (14). 
• Fed Speak: Chicago's Evans will be in Coralville, IA, speaking at the Corridor Economic Forecast Luncheon (12:50) and ATL's Lockhart will discuss the economy and monetary policy (17:20).

Next Day In View 

Economic Commentary

Economic Summary: Retail Sales top expectations; Business Inventories roughly in line with expectations; Fisher will continue votes for tapering; Beige Book tomorrow at 14:00
Economic Data Summary:

·         December Retail Sales 0.2% vs Briefing.com consensus of 0.0%; November was revised to 0.4% from 0.7%

·         December Retail Sales Ex-Auto 0.7% vs Briefing.com consensus of 0.4%; November was revised to 0.1% from 0.4%

o     Given the weak jobs report and the corresponding decline in aggregate wages, there was real potential for a dismal December retail sales report. In order for sales to increase, consumers had to dip into their savings or spend on credit. Our analysis of debt trends suggested that consumers could increase their debt load without feeling much pain, but the psychological effect of maintaining high savings was outweighing low debt ratios. It seems that the mental hold on spending may be ending. As expected from the motor vehicle manufacturer data, sales of motor vehicles and parts fell 1.8% in December and gave back nearly the entire 1.9% gain from November. Excluding motor vehicle sales, retail sales rose an impressive 0.7% in December. 

·         December Export Prices Ex-Ag 0.3% vs Briefing.com consensus of ; November was 0.1%

·         December Import Prices Ex-Oil -0.1% vs Briefing.com consensus of ; November was 0.0%

·         November Business Inventories 0.4% vs Briefing.com consensus of 0.3%; October was revised to 0.0% from 0.7%

o     Both manufacturers (0.0%) and merchant wholesaler (0.5%) inventories were announced prior to the total inventory release. The only unknown was retailer inventories, which increased 0.8% in November after increasing 1.1% in October. Retailer inventories increased in all major sectors, including a sizable 1.3% from motor vehicles and parts dealers. Excluding motor vehicles, inventories rose 0.6% in November, topping a 0.3% increase in October.

Fed/Treasury Events Summary:

·         Dallas Fed President Richard Fisher (voting FOMC member, hawkish) said he will continue to vote for tapering; says will support taper even if stock market corrects; said does not see bubble in stocks and bonds. He said that he would have preferred to pull back our purchases by double the announced amount.

·         Philadelphia Fed President Charles Plosser (voting FOMC member, hawkish) spoke and said he is forecasting approx 3% growth in 2014; aid job market has performed better than expected; believes December report hit by cold weather.

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was 2.6%)

·         December PPI due out Wednesday at 8:30 (Briefing.com consensus of 0.3%; November was -0.1%)

·         December Core PPI due out Wednesday at 8:30 (Briefing.com consensus of 0.1%; November was 0.1%)

·         January Empire Manufacturing due out Wednesday at 10:30 (Briefing.com consensus of 3.5; December was 1.0)

Upcoming Fed/Treasury Events:

·         Chicago Fed President Charlie Evans (not a voting FOMC member, typically dovish) to speak tomorrow at 12:50.

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, typically moderate) to speak tomorrow at 17:20

·         Fed's Beige Book tomorrow at 14:00

Other International Events of Interest

·         Japan's current account deficit widened to JPY593 billion from JPY128 billion (JPY380 billion expected) while the adjusted current account deficit narrowed to JPY50 billion from JPY60 billion (JPY20 billion consensus). 

·         Eurozone Industrial Production rose 1.8% month-over-month (1.4% forecast, -0.8% last) while the year-over-year reading climbed 3.0% (1.4% expected, 0.5% prior). 

On other news.... 

Currencies 

Dollar Ticks Higher in Quiet Trade: 10-yr: -07/32..2.869%..USD/JPY: 104.11..EUR/USD: 1.3673

·         The Dollar Index trades just off session highs as action presses the 80.65 level. Click here to see a daily Dollar Index chart.

·         Today's action has been supported by comments from hawkish Fed Presidents Fisher and Plosser, who suggested the Fed could continue to pare back its asset purchases.

·         EURUSD is +5 pips @ 1.3675 as a rather uneventful trade nears the close. Action has been limited to just a 30 pip range in U.S. action as trade struggles near 1.3650/1.3700 resistance. 

·         GBPUSD is +55 pips @ 1.6435 after early action held 1.6370 support. The pair jumped to session highs near 1.6465 as equity markets opened with strong gains, but has leaked lower throughout the remainder of the session. Bank of England Governor Mark Carney will testify on the Financial Stability Report. 

·         USDCHF is +35 pips @ .9025 as trade presses its best levels of the session. Today's advance has erased all of yesterday's losses, and has the pair looking likely to end its three-day skid. Current action is probing the 50 dma, but the more important level remains .9100 as resistance there is helped by the 100 dma (.9078). Swiss retail sales are due out tomorrow. 

·         USDJPY is +115 pips @ 104.15 as trade sits on session highs. Today's bid comes after early action tested, and held, 103.00 support, and has allowed the pair to recover all of yesterday's losses. What was previously support in the 104.00 area will become resistance if not retaken in a timely manner. 

·         AUDUSD is -95 pips @ .8955 as selling over the course of the day has the pair on its lows. Hard currency bears remain focused on the .8850 level as a breakdown drops action to levels last seen in the summer of 2010. Australian data is limited to new motor vehicle sales. 

·         USDCAD is +100 pips @ 1.0960 as trade presses its best levels since September 2009. Today's advance has the pair higher for the sixth time in seven sessions, during which the bulls have managed to tack on roughly 330 pips. Recent action has become almost parabolic in nature, causing some to look for a pullback into the 1.0700 support area.

Jason's Commentaries


Expected a up day after such a bear day in the market. Market is still too bullish to go down massively. The market started last night with a bullish move all the way to the closing bell. Gaining above 1% for NASDAQ and S&P500. Dow was the weakest gainer, gaining only 0.71%. Approx half of Dow's component stayed flat like BA, UNH, JPM, AXP etc. However we see most of the index back to their highs once again.

Volumes were standing at 647.3m shares traded on the NYSE, internals were all showing bullish convergence and there is hardly doubt about last night's bullishness. Unlikely to be short covering give such convergence. As for the best performing sectors, we've got Tech and Materials being the strongest leaders with 1.69% and 1.4% gain respectively. Tech got a boost as Mircosoft, Google, HP, Intel and Apple gaining above 2% last night. What a bullish day for the tech. It seems that Tech might be leading another breakout. As for the economic report released last night for Retail sales, It seemed more like a non-event in the market. The market is focusing on the earnings results. JP Morgan and Wells Fargo beat their bottomline, but revenues inline. Not exactly fantastic, but not exactly bad as well... so-so only. It seems that we've gotta wait for more banks to release their earning. Seems that we're likely to have flat day in the market today  
  

Market Call: FLAT

Date: 15 Jan 2014